Actually they pay 40 to 60%. Most of what they sell is twice or more what they paid. This by the way from a now long retired dealer friend who for years sold me whatever I wanted for 5% above his cost. Every time he would tell me what something cost then he would say "your cost" and it was always half or less.
The same btw is true of most things, including cars. Which is why car dealerships are so incredibly profitable. Another shocker, the markup at wholesale is about the same. Double. Or more.
So you take your typical $5k component, speaker or whatever, cable, does not matter. Dealer cost $2500, cost to manufacture, $1250. Ballpark numbers.
This explains why everything at the cheap end is such absolute crap. The earbuds that cost $30 were made for $7. Half of that is shipping and packaging, so really you’ve paid $30 for $3 worth of product. If that.
This is nothing to do with margins. Profit margins include expenses for rent, inventory, sales staff, shipping, power and heat, and of course the owners own time. Profit margins in audio are in the low single digits. If a dealer clears 5% that was a good year.
Well moving $1M of high end audio that’s $50k profit, on top of the salary the guy paid himself as part of his expenses. A good dealer in the right market could move $10M, even $100M. But he had to take all that risk and move all that product to clear an extra $50k, $500k or whatever.
Its a rough business. There were components my friend liked and wanted to sell but many manufacturers have inventory requirements that force their dealers to carry all or a minimum number of their line in order to sell the one thing they actually can sell. This eats into their profits on the stuff they do sell. Then because they have to carry that stuff they wind up having to try and sell it, which being crap means shilling, which they do, which eats into their credibility. You can see them on here shilling and calling their competitors shills. Not to mention they can no longer even rely on a territory, they compete with everyone all over the world, and yet are expected to be knowledgeable, provide service, and coddle to customers who feel entitled to a 10% discount over a speck of dust. Which now having read this you understand is more than they cleared on the deal.
What is the average dealer markup? Too much. Nowhere near enough. Somewhere in there.
